A small portion of the consumer population in the subprime credit tier is increasingly struggling to make on-time payments, according to the April CreditGauge analysis examining the key drivers of consumer credit health. The rise in delinquencies stands in contrast to a significant new increase in credit originations across all credit products as lenders increasingly tap into Prime borrowers.
In a more positive development, the overall average VantageScore credit score rose modestly to 702. Enticed by high overall consumer credit scores and positive economic conditions for consumers, lenders unexpectedly increased their issuance of credit in a variety of credit products, including credit cards.
“The American consumer remains resilient, but we are seeing those with lower credit scores miss payments more frequently,” said Susan Fahy, Executive Vice President and Chief Digital Officer at VantageScore. “The slowdown in the economy and higher cost of goods has impacted them to a much greater extent than consumers with higher scores who are more actively seeking and getting approved for new loans.”
SUBPRIME UNDER PRESSURE BUT SHRINKING: Overall delinquencies rose compared to a year ago, with the most significant increase in the 30 days past due Subprime category, recording a 20% increase year-over-year. The overall proportion of consumers in the lowest Subprime credit tier continues to decline and stands at 17.9% in April 2023.
NEW CREDIT ACCOUNTS INCREASE, CREDIT CARD ISSUANCE RISES: Credit originations rose in April across all products. Personal loans rose the highest month-over-month, followed by credit card, auto loans, and mortgages, respectively. Credit card issuance rose for the second consecutive month in April, indicating that lenders remain willing to lend to creditworthy consumers.
AVERAGE BALANCES AND UTILIZATION REMAIN FLAT: Year-over-year balances have remained up, with an increase of 5.6% in April to $5,457. Higher prices and interest rates continued to factor into increased consumer spending. On a month-to-month basis, however, overall balances and the utilization rate remained flat, indicating that consumers are cautious and still spending on essential services.
See the original CreditGauge data here.
This article originally appeared on the VantageScore Blog and was syndicated by MediaFeed.org.
Featured Image Credit: alphaspirit / iStock.
